"While the clock is ticking, the Republican majority is dickering and the American people are hurting. Our financial markets are on pace for their worst week in nearly a year. State governments are bracing for downgrades in their borrowing capacities,"

Curious, how come there is not enough support from the Republican caucus?

"The U.S. House of Representatives has delayed a vote on a Republican plan to cut government spending and raise the federal borrowing limit in two stages. With only five days until a potential default on the national debt, drama reached a peak in the House late Thursday, as the Republican Speaker of the House, John Boehner, postponed the vote amid reports he did not have enough support among his own Republican caucus to pass it. "

But the Senate won't pass it anyway?

"On the Senate side, 53 Senate Democrats have signed a letter saying they will not vote for the Boehner plan, so analysts says the House measure has virtually no chance of passing the Senate, even if the Speaker manages to get it passed in the House on Friday. Senate Majority leader Harry Reid has put forward his own plan to raise the debt limit and cut spending, and it has been endorsed by President Barack Obama."

This is not looking good, folks. Partisan issues need to be limited to reach a compromise. This is scaring the rest of the world markets.

They don't have enough support because cutting spending is a dumb idea, the only way out of the hole is to push on through with a $3 trillion stimulus on road building and education with no pork side projects. Also, we either need socialised medicine to cut medicare costs, or we need to kill a whole bunch of baby boomers - you pick.

The reason that the defects are out of wack is because revenue is down, and revenue is going to be even more down after they cut spending. Spending is bad too - it is up 100% or so over the last 10 years and gdp is only up 50%, but that extra is mainly war related.

But the tea partiers got elected, so the non-tea party folk have to pretend to be on board the stupid train, preferably with a fake "spending cut" bill of some kind. So there are two groups of "Republicans", the ones with the real spending cut bills, and the ones with the fake bills, and they can't agree.

It is one thing to be "Austrian School" and all that, but the people that are looking forward to the debt limit getting hit? These are children playing with firearms.

If they don't get a debt limit increase, do you guys think interest rates on treasuries will go up or down? I can see both arguments - interest rates go up because they are riskier assets, and interest rates go down because people get scared and cash out of stocks.

nvidea - this is not sh1t hitting the fan, wake me when something goes down 10% or something. They didn't get the votes for Boehner's plan, he had stiff opposition .

"While the clock is ticking, the Republican majority is dickering and the American people are hurting. Our financial markets are on pace for their worst week in nearly a year. State governments are bracing for downgrades in their borrowing capacities,"

Curious, how come there is not enough support from the Republican caucus?

"The U.S. House of Representatives has delayed a vote on a Republican plan to cut government spending and raise the federal borrowing limit in two stages. With only five days until a potential default on the national debt, drama reached a peak in the House late Thursday, as the Republican Speaker of the House, John Boehner, postponed the vote amid reports he did not have enough support among his own Republican caucus to pass it. "

But the Senate won't pass it anyway?

"On the Senate side, 53 Senate Democrats have signed a letter saying they will not vote for the Boehner plan, so analysts says the House measure has virtually no chance of passing the Senate, even if the Speaker manages to get it passed in the House on Friday. Senate Majority leader Harry Reid has put forward his own plan to raise the debt limit and cut spending, and it has been endorsed by President Barack Obama."

This is not looking good, folks. Partisan issues need to be limited to reach a compromise. This is scaring the rest of the world markets.

Please read Robert Reich post today in Huffington Post and tell me after that if this all Debt ceiling crisis is not that critical like it is meant to be by the GOP Party. Thanks Marv

Very interesting. I would say the Republicans are milking this, but why is the Administration "playing along" as the post mentions? Why are the Dems and the Administration not reassuring the global investors? Are they too caught up in "battling" the GOP?

I agree it's not that critical in the sense that it's not a "budget crisis", Reich's post says that there will probably be no debt default like everyone is worrying about. But somehow the world thinks that a "default" could happen.

At our farm, everything was kept inside the company during high tax years like the 1960s. All the family members were employees, houses were owned by the company, no dividends were issued, etc. Once the taxes went down, it was safe to issue dividends again. It gets even better if the company is offshore, like in Australia, then you are safe no matter what tax law gets passed.

That graph is misleading and here's why (make sure you click the link and look at the same data but in a graph that doesn't flatten out the data)-

"I've seen versions of this dating back two decades. Part of the scam is a simply visual trick familiar to anybody who read "How To Lie With Statistics" -- you scale the chart to make a major change appear tiny. De Rugy's chart, one which the scale of federal tax revenue goes from an absurd o to 100, seems to show little change, thus proving the supply-side claim that increasing marginal tax rates is self-defeating. Here's a chart showing the range of revenue within a reasonable scale:

As you can see, the swings are fairly dramatic. De Rugy's chart purports to show that reducing the top marginal tax rate produced no real change in revenue. But of course the first Reagan tax cuts in 1981 caused revenue to plummet. The top marginal tax rate was also reduced in 1986, but that was accompanied by equally large reductions in tax expenditures, and the whole reform was not designed to reduce revenue.

Meanwhile, the tax hikes by George W. Bush and Bill Clinton -- which supply-siders claimed would not increase revenue -- were followed by a massive spike in revenue. And then the tax cuts by George W. Bush -- which supply-siders claimed would not reduced revenue by very much -- were followed by a massive, 5% of GDP drop in* revenue, which receded to 2% of revenue at the peak of the 2000s economic cycle."
~ http://www.tnr.com/blog/jonathan-cha...lassic-edition

"Islam is as dangerous in a man as rabies in a dog"~ Sir Winston Churchill. We are nurturing a nightmare that will haunt our children, and kill theirs.

And this was what? At least mine are truthful. And really not so vacuous. If the shit hits the fan it's going to be all of us suffering and the it will be the conservatives to blame. Now I'll bet that's a little something substance you wish wasn't true. So laugh away. It illustrates an attitude of not working together and extreme policies. The very same thing that's putting us all in peril.

Also since the conservatives have been so concerned throughout this with the upcoming election we've come close enough to the brink right now that Obama might as well already be saying thanks for the votes.

Without the need for difference or a need to always follow the herd breeds complacency, mediocrity, and a lack of imagination

If the shit hits the fan it's going to be all of us suffering and the it will be the conservatives to blame.

Actually, there's plenty of blame to go around among the ruling/political class regardless of party.

Quote:

Originally Posted by jimmac

The very same thing that's putting us all in peril.

What has put this country in peril is ever larger government, ever higher government spending an debt and an unwillingness to make hard choices and tell the American people that it's so-called "middle way" its unique form of socialism has now run out of other people's money and they can no longer live at other people's expense.

They don't have enough support because cutting spending is a dumb idea, the only way out of the hole is to push on through with a $3 trillion stimulus on road building and education with no pork side projects. Also, we either need socialised medicine to cut medicare costs, or we need to kill a whole bunch of baby boomers - you pick.

You're kidding, right?

Quote:

The reason that the defects are out of wack is because revenue is down, and revenue is going to be even more down after they cut spending. Spending is bad too - it is up 100% or so over the last 10 years and gdp is only up 50%, but that extra is mainly war related.

Revenue growth comes from economic growth. Economic growth happens when people and businesses keep more of their earnings and government gets out of the way.

Quote:

But the tea partiers got elected, so the non-tea party folk have to pretend to be on board the stupid train, preferably with a fake "spending cut" bill of some kind. So there are two groups of "Republicans", the ones with the real spending cut bills, and the ones with the fake bills, and they can't agree.

It is one thing to be "Austrian School" and all that, but the people that are looking forward to the debt limit getting hit? These are children playing with firearms.

I think they should have had some balls on this. They should have passed their plan, crossed their arms, and said "fuck it...we're going golfing." Let Obama and the Dems stew in their own shit. Make them pass it. But they don't have the balls to do that. They're too worried about getting blamed. What they fail to understand is that they are getting blamed either way.

I can only please one person per day. Today is not your day. Tomorrow doesn't look good either.

That graph is misleading and here's why (make sure you click the link and look at the same data but in a graph that doesn't flatten out the data)

Its a flat line with noise, centered around 18% of gdp. I am convinced that the ramp up during clinton was extra capital gains taxes from the dot com boom, and the dot com bust caused most of the trough on the other side of that. No, of course, we are starting into the second great depression, which is why the bottom fell out.

Its a flat line with noise, centered around 18% of gdp. I am convinced that the ramp up during clinton was extra capital gains taxes from the dot com boom, and the dot com bust caused most of the trough on the other side of that. No, of course, we are starting into the second great depression, which is why the bottom fell out.

Yeah. If anything this graph above is a perfect example of the misleading thing he was talking about. By shrinking the scope of the Y-axis (14-22%) is accentuates and magnifies what are really relatively small changes. Adding a trending/averaging line to this graph would show this more clearly.

No, we know that Japan failed to get out of its liquidity trap (either because they were too wimpy on stimulus, or because Kensyanism does not work), and we have only one example (not counting currency failures and hyperinflation) that worked - WWII. We spent 35% of GDP for three years in a row on WWII, and it ended the problem.

No, we know that Japan failed to get out of its liquidity trap (either because they were too wimpy on stimulus, or because Kensyanism does not work), and we have only one example (not counting currency failures and hyperinflation) that worked - WWII. We spent 35% of GDP for three years in a row on WWII, and it ended the problem.

Actually, in recent years, there's a lot more debate (and doubt) about the Keynesian "stimulative" effects of WWII in relation to "ending the Great Depression." The standard high school text book story on this is trending toward myth status at this point. Which would end up leaving Keynesianism with no examples of success and plenty of failure. But Keynesianism is like a zombie...it is the un-dead...for some reason it won't go away despite its failures and logical flaws.

Actually, in recent years, there's a lot more debate (and doubt) about the Keynesian "stimulative" effects of WWII in relation to "ending the Great Depression." The standard high school text book story on this is trending toward myth status at this point. Which would end up leaving Keynesianism with no examples of success and plenty of failure. But Keynesianism is like a zombie...it is the un-dead...for some reason it won't go away despite its failures and logical flaws.

I don't have the time at the moment to go into this in detail but, aside from focusing on a single metric (unemployment) your you're assuming the causal relationship goes to the "stimulative spending" to explain the correlation you're showing.

What's even more interesting is that the counter argument to the claim that massive cuts in (government) spending will basically crash the economy, the period of time you refer to is actually a counter example of this:

Quote:

In the four years from peak World War II spending in 1944 to 1948, the U.S. government cut spending by $72 billion—a 75-percent reduction. It brought federal spending down from a peak of 44 percent of gross national product (GNP) in 1944 to only 8.9 percent in 1948, a drop of over 35 percentage points of GNP.

While government spending fell like a stone, federal tax revenues fell only a little, from a peak of $44.4 billion in 1945 to $39.7 billion in 1947 and $41.4 billion in 1948. In other words, from peak to trough, tax revenues fell by only $4.7 billion, or 10.6 percent. Yet, the economy boomed. The unemployment rate, which was artificially low at the end of the war because many millions of workers had been drafted into the U.S. armed services, did increase. But during the years from 1945 to 1948, it reached its peak at only 3.9 percent in 1946, and, for the months from September 1945 to December 1948, the average unemployment rate was only 3.5 percent.

There's actually a lot you can read that provides fairly reasonable challenges to this commonly accepted explanation and fairly reasonable counter explanations and rationale.

"In the four years from peak World War II spending in 1944 to 1948, the U.S. government cut spending by $72 billion—a 75-percent reduction. It brought federal spending down from a peak of 44 percent of gross national product (GNP) in 1944 to only 8.9 percent in 1948, a drop of over 35 percentage points of GNP.

While government spending fell like a stone, federal tax revenues fell only a little, from a peak of $44.4 billion in 1945 to $39.7 billion in 1947 and $41.4 billion in 1948. In other words, from peak to trough, tax revenues fell by only $4.7 billion, or 10.6 percent. Yet, the economy boomed. The unemployment rate, which was artificially low at the end of the war because many millions of workers had been drafted into the U.S. armed services, did increase. But during the years from 1945 to 1948, it reached its peak at only 3.9 percent in 1946, and, for the months from September 1945 to December 1948, the average unemployment rate was only 3.5 percent."

You are just not thinking this through. If I am right, and WWII ended the problem, then the above quote would be *exactly* what happened afterward - the only way employment would have dropped with spending afterwards is if the *stimulus had failed*. Plus there is the little matter of every other industrialized country being destroyed by WWII, we had no competition.

You are just not thinking this through. If I am right, and WWII ended the problem, then the above quote would be *exactly* what happened afterward.

Not necessarily. You're think about this the wrong way. It was the massive reduction of government involvement in the economy (spending primarily) relative to what was happening during WW2 that resulted in the post-war boom.

Not necessarily. You're think about this the wrong way. It was the massive reduction of government involvement in the economy (spending primarily) relative to what was happening during WW2 that resulted in the post-war boom.

Nope, government spending after the war was a lot more than before the war. You are wrong.

Nope, government spending after the war was a lot more than before the war. You are wrong.

I'm talking about the spending from the war period to post-war period. Look at the massive drops on the green and orange lines in that graph. It has definitely grown steadily since then (which is a drag on the economy over time) but there was a massive drop post-war which is the new thinking about what cause the post-war boom. It is about a change relative to the period immediately previous to the time period you're thinking of.

Long story short...a massive cut in government spending is much more likely to increase economic growth and wealth creation than the opposite. And solid logical economic reasoning supports this claim also.

Green line - before the war 15%, after the war 20%
Orange line - before the war 8%, after the war 15%

I'm looking, what did you expect me to see?

If your claim is that government spending ended the pre-WWII recession, you may be right in part. But it was Keynesian in any sense. Much of it was military spending, which provided jobs in manufacturing and ancillary industries. After the war, it was up to the private sector to get the economy moving. It was the men returning home and the post-war baby boom that really got things moving...not the government.

I can only please one person per day. Today is not your day. Tomorrow doesn't look good either.

If your claim is that government spending ended the pre-WWII recession, you may be right in part. But it was Keynesian in any sense. Much of it was military spending, which provided jobs in manufacturing and ancillary industries. After the war, it was up to the private sector to get the economy moving. It was the men returning home and the post-war baby boom that really got things moving...not the government.

Go back and re-read what I have said. The war fixed the problem, which allowed the private sector to get the economy moving. If there had been no war, the economy would not have gotten moving.

Then why, between 1929 and 1941, did the private sector fail to do this miracle that you all are talking about?

Because of the Keynesian economic policies of both Hoover and FDR that prolonged an economic recession into a depression. These acted like a wet blanket on the economy. Pretty much like what's happened today...only the names are Bush and Obama this time.

In fact Hoover and FDR did exactly the opposite of what they should have. Had they not done these things the phrase "Great Depression" wouldn't even be in our vernacular. Bush and Obama did exactly the opposite of what they should have done in response to the market down turn in 2008.

As evidence in support of this claim, look at the depression of 1920-1921 and the ensuing actions of the government...and the response of the economy.

They don't have enough support because cutting spending is a dumb idea,

Do you really believe this? It has to be done. We can't continue to borrow 40 cents (and soon more) on every dollar.

Quote:

the only way out of the hole is to push on through with a $3 trillion stimulus on road building and education with no pork side projects.

That approach has failed miserably every time it's been tried. It does nothing to stimulate growth in the private sector in any lasting or meaningful way. I'm actually surprised that you'd even have the balls to post this given the unquestioned failure of the stimulus. Let me guess...it wasn't big enough and/or implemented correctly?

Quote:

Also, we either need socialised medicine to cut medicare costs, or we need to kill a whole bunch of baby boomers - you pick.

Socialized medicine will not reduce costs, because there will be even less incentive to control costs among patients and providers than there is now. And, it will put millions of people out of work who currently are employed in insurance. It will lower the quality of care and lead to rationing, such as the UK is experiencing.

As for entitlements, we need real reform. Social Security should have an opt-out for younger workers while current retirees and people within 5 years of hitting the eligibility age should be guaranteed full benefits. After that it begins to phase down. Medicare needs real competition and cost controls. This concept is one reason that Medicare Part D is actually well UNDER budget.....seniors can choose their own plans.

I can only please one person per day. Today is not your day. Tomorrow doesn't look good either.

Actually, there's plenty of blame to go around among the ruling/political class regardless of party.

What has put this country in peril is ever larger government, ever higher government spending an debt and an unwillingness to make hard choices and tell the American people that it's so-called "middle way" its unique form of socialism has now run out of other people's money and they can no longer live at other people's expense.

Talk about drive by vacuous comments.

The GOP's posturing is so transparent. They want us to go through this again closer to the election.

After all it's it's all about getting Obama out of the Whitehouse at any cost!

Oh well it's not the first time the Republicans have shot themselves in the foot and their plans have back fired. And this time they have the Teabaggers to thank for it.

Thanks for the votes.

Without the need for difference or a need to always follow the herd breeds complacency, mediocrity, and a lack of imagination

SDW - I really believe that. I think that Japan got in the hole it is in because they spread their stimulus too thin, and got all the debt of a stimulus without the benefits.

Socialized medicine reduce costs dramatically - go look at per-capita costs for all of the other industrialized nations, ours is way higher. Rationing is better than killing all the old people - the costs of private insurance are growing faster than medicare, and medicare is growing faster than Canada's health plan - plus Canadians live longer than we do. A decade or two from now only millionaires will be able to afford private medical insurance.

How would "opt out" help social security? The SS debt would go exponential.

I don't think you are thinking about this as a math problem, your solutions make no sense at all if you do.

When I asked earlier, I was completely of the belief that we'd come to an agreement about this thing.

But we're four days out, both sides can only blame the other, and every plan put up gets shot down.

So now what are the odds that we'll get anything done in time?

In time for what?! First, the date keeps moving...out. Second, it's not like even if they don't get something done by that date that default is the next step. It simply means that they will not be able to borrow money and will be forced to cut spending. Default is when the US can no longer pay interest on its debt. We're a long, long way from that happening. The interest in around $200B/year. The federal government is bringing in about $2.2T/year. They can pay the interest. They will just have to cut other spending. And they will cut spending on the the least valuable things. Treasury will determine what spending is cut. Which is why Obama is scared because the fact that everything he and the Democrats have claimed is of the utmost importance will be laid bare as being not quite so important.